The reorganization of the “Peresvet” put at a disadvantage holders of its bonds

After Monday, April 24, lifted the moratorium on the settlements of the Bank “Peresvet” from creditors (as a result of the reorganization of the Bank), the holders of small blocks of bonds “Peresvet” has split into two camps. The reason for this was the message on the website of the Bank and the company “Region” Finance, representing owners of the bonds.

Of them indicated that those minority shareholders who had part of their funds in saving Bank, freezing his funds invested in Bank bonds was in a much worse position than their minority colleagues, those who owned securities of several bond issues that are in recovery “overexposure” to be committed.

At the same time avoiding participation in the rescue of the Bank minority bondholders ‘ risks re-emerged, forced involvement in rehabilitation “Peresvet”.

Such experience in the Russian practice of rehabilitation of banks was not. Still in Russia, the banks ‘ shareholders did not participate in their rehabilitation. The urgency of the situation makes the fact that among the minority of bondholders “Peresvet” was not only legal, but also individuals who are invested in the securities of relatively small amounts, from several hundred thousand to several million rubles. This was added to by minority bondholders.

Still, arguing about whether individuals to participate in the rescue of troubled banks, the authorities spoke against it. The head of the Central Bank Elvira Nabiullina, commenting on the Bank bailout by the procedure of bail-in (restructuring of banks at the expense of their creditors, and were applied in the case of the “Peresvet”), doubted the usefulness of the participation of individuals in the mechanism of bail-in. The head of the Agency on insurance of contributions (ASV), Yury Isaev directly opposed the participation of individuals in the procedure of bail-in.

The queue at the Central office of the Bank “Peresvet”

Photo: Sergey Fadeichev / TASS

History

On 19 April the Bank of Russia announced the reorganization of the Bank “Peresvet” on the procedure of bail-in conversion of debt creditors (including bond holders) in the capital of the Bank with the financial support of the Central Bank. Creditors and state “chipped in” nearly in half — by 69.7 billion and 66.7 bln, respectively. Among the creditors were the bondholders of the Bank.

Just “Relight” it was nine bonds. In the course of bail-in requirements for the Bank to holders of its bonds is converted into much longer the Bank’s debt to them than it was initially on the bonds, at an interest rate, also much smaller than expected these securities (because such a debt is considered a capital). In the case of bondholders “Peresvet” in the capital it was proposed to convert 85% of the bond debt 15% debt to bondholders had promised to pay “real money”.

When this conversion happened automatically, but the vote of the holders of the bonds. The owners of the minority blocks of securities are forced to obey the will of the majority of large voting. “According to the law on most issues is quite positive decisions 50 plus 1% of owners of issue — says minority paper holder and master of the Research centre for private law. Alekseeva (ICCP) Nikolay Pavlov. — In this situation the remaining holders automatic subject to conditions adopted by the majority. This decision applies to those who voted against or did not participate”.

A vote of a majority of the votes of bondholders in favor of the conversion have been collected on six of nine issues of securities “Peresvet”. The six editions of the demands of minority bondholders have been converted automatically. Three other editions of the majority of holders of securities “Peresvet” voted against it. Accordingly, the debts of the Bank to the minority holders of bonds of these issues was not converted. “Indeed, one issue (BO-04) decision on the conversion not taken on any item on the other two (B-03 and BO-01) was selected only representatives of the owners of the bonds, which is insufficient to convert” — confirms the head of Department of investment products “KIT Finans” Yury Arkhangelsk.

What’s the problem

Initially, the minority bondholders, subject to conversion, even found in that certain advantages, say sources. “It was assumed that they end up, even after 20 years, return the principal debt on the bonds plus get even a small (0.51% per annum, promised by the conversion results. — ) but the interest, — tells one of sources . — It was considered that creditors not subject to conversion, may require after the beginning of the reorganization of the Bank to repay their bonds only at par, with no requirement of coupon income and only through the courts, which can last in some cases for several years.”

However, the source continues , after the publication of the message “Region Finans” it became clear that not participating in the Bank bailout, minority shareholders can still expect normal service bond “Peresvet”, including the payment of the coupon income and principal repayment in the initially specified time frame. 25 APR Peresvet announced the beginning of payments of the coupon income for unconverted bonds. “It puts a minority of bondholders, whose claims to the Bank underwent a conversion in a disadvantaged position and cause their dissatisfaction,” he says.

However, not only forced saving “Peresvet” minorities, but they are thought to be more lucky colleagues. Their fears, in turn, causes mentioned in the report of the Bank proposal “to creditors, until now did not participate in the process of conversion tools… to participate in the procedure of bail-in.” Of these words, the minority shareholders, to avoid participation in bail-in, concluded that the Central Bank has a view of a second vote of the creditors on non-release of papers, say sources .

Photo: Oleg Yakovlev /

“Indeed, for the restructuring of these three issues the Bank will need to repeat the procedure of voting creditors, confirms Arkhangelsk. A key risk of repeat voting in the remaining three editions is that in the face of one of the creditors — of Tatfondbank (the license was revoked on March 3, the Bank declared bankrupt on 11 April) — the vote will not be a Bank and the bankruptcy Trustee in the face of the DIA,” says one of the interlocutors . Given that this is a friendly Central Bank (in charge of the Bank bailout, and are interested in the largest possible volume conversion) structure, most likely, she will vote for conversion. As a result there is the risk of forced involvement in the Bank bailout of those who in the first ballot escaped this fate, the source explained .

“Unfortunately, we are far from best practices that have long been enshrined in developed countries, we have no control over the conditions triggered by the Issuer of the debt restructuring,” — says the partner Tertychny Agabalyan Ivan tertychnyy.

Options

On the background of the current controversial situation, the number of minority bondholders, so far avoided participation in the rescue of the Bank nervous. Two holders, which managed to contact , who requested anonymity, said that he appealed on April 25 in the Bank with the requirement to repay debt securities, even with the risk of losing potential interest income. One of them said that if after seven days the Bank will not fulfil the requirements, then it will go to court.

“Such actions are legitimate, because, while the Bank “stood” (within six months prior to the readjustment to “Peresvet” moratorium on payments to creditors. — ), required payments of the coupon income on bonds was not made, which means the default, and usually the decision to issue prescribed that at default the holder will have the right to demand early repayment of bonds at par,” says Tertychnyi.

Reasons to rush to early redemption at the bondholders is. As the message “Region Finans”, in the case of payment by the Issuer of the debt accumulated coupon income to demand early repayment, the bondholders will no longer be able.

From minority shareholders, whose claims to the Bank was restructured force, even smaller ones. One of the minority owners of the bonds (several hundred thousand) has announced that it has written an appeal to the presidential administration of the Russian Federation with the complaint to the situation. However, according to him, in the end, this appeal went to the Bank, which answered that the bond holder has the right to appeal against this decision in arbitration court. Several holders of bonds subjected to conversion, saying that it would consider such a path but hopes for a positive outcome do not cherish.

With this agreement and the lawyers. “Challenging the decision of the General meeting of creditors is practically impossible for minority shareholders “Peresvet” — said Ivan tertychnyy. Is really only in case of gross violations of process — lack of quorum violations in terms of alerts or if the decision was made, not included in the agenda, and only then, when the voice of the owner of the paper would be meaningful for decision-making”.